China's power storage sector to attract $147.9b as grid reforms accelerate

Capital will flow into grid-scale storage as renewables expand.

China’s power storage investment will reach about $147.9b (RMB1t) over the next five years, with grid operators and independent power producers (IPPs) expected to lead deployment, according to S&P Global Ratings.

The agency said the financial impact is expected to remain manageable within existing capital expenditure plans.

In its report titled China’s Energy Transition: Cracking The Profit Puzzle Of Power Storage, S&P Global Ratings said storage is shifting towards a revenue-generating component of China’s electricity system as the country expands renewable capacity and advances market-based pricing reforms.

It noted that storage is becoming essential to integrate wind and solar generation, reduce curtailment and improve grid reliability, whilst supporting decarbonisation targets and enabling operation under more volatile spot market pricing.

S&P Global Ratings said pumped hydro storage has dominated the sector, but battery energy storage systems will grow faster as renewable penetration increases.

“IPPs that develop battery storage will focus on project economics and not just fulfilling a compliance obligation,” said Scott Chui, credit analyst at S&P Global Ratings, adding that storage will provide additional revenue streams and hedging against price volatility.

The agency said the cost of storage projects has halved over the past three years, improving project viability as pricing reforms develop.

It added that improved revenue visibility will support investment decisions across the sector.

(US$1 = RMB6.76)